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Flashcards in IT OPERATIONS - Transaction Processing Deck (5):
1

Transaction Processing

4 steps in manual processing:

1) enter transaction on source document
2) record source document in journal
3) copy to ledger (master file)

1.
The general ledger -- Classifies transactions by financial statement accounts (cash, inventory, accounts payable, sales revenue, supplies expense, etc.).
2.
The subsidiary ledgers (sub-ledgers) -- Classify transactions by alternative accounts (e.g. customer accounts, vendor accounts, product accounts). Not all transactions are posted to sub-ledgers: each sub-ledger corresponds to a single general ledger account, and only transactions that affect that account are posted in the sub-ledger. Examples of sub-ledgers include the following:
a.
A/R sub-ledger -- Classifies A/R transactions (credit sales and customer payments) by customer.
b.
A/P sub-ledger -- Classified A/P transactions (credit purchases and payments to vendors) by vendor.
c.
Inventory sub-ledger -- Classifies Inventory transactions (product purchases and product sales) by product.

4) prepare reports

From general ledger - trial balance and FS
From subisidary ledger - customer A/R balances, vendor A/P balances, etc

2

Batch processing

Group of transactions (batch) - sort into item number sequence (BATCH IS SEQUENTIAL; must be sorted because batch can be processed quickly)

Example:update inventory records
1st source into inventory master file order
2nd update inventory master file (which is also sorted like source)

TRANSACTION AND MASTER FILES MUST BE SORTED ON A COMMON KEY - SQUENTIAL ACCESS FILES

When? - used when sequential process, low volume periodic reports, transactions are independent or unimportant (fixed asset updates, depreciation postings)

Why not use batch? Not real time, always out of date, delays error detection


Step 1: Data entry: The transactions data is manually keyed (usually) and recorded in a transactions file.
Step 2: Preliminary edits: The transaction file data is run through an edit program that checks the data for completeness and accuracy; invalid transactions are corrected and re-entered.
Step 3: Sorting: The edited transaction file records are sorted into the same order as the master file.
Step 4: Master file update: The individual debits and credits are used to update the related account balance in the general ledger master file and, if appropriate, in the subsidiary ledger master file.

3

OLRT

Continous immediate transaction processing.

Near simultaneous transaction entry and master files updating

Why? Most current acounting systems, need real-time data, want better customer service, interdependent data, high transaction volume

Why not? Cost

4

POS point of sales

Scanners capture data from bar codes

Computer system connected or integrated with electronic cash register

Pos networked to a central computer that maintains database of products available

5

Computerized processing of Accounting Information

A.
Data entry/data capture -- When a transaction occurs, the data may be manually recorded on a physical source document and then keyed into the system, or the data may be captured electronically using automated data capture equipment such as bar code readers.
1. The transaction data is recorded in a transaction file:
a.
Transaction files -- In a computerized environment, they are equivalent to journals in a manual environment.
b.
Transaction files are temporary files -- Data in the transaction files is periodically purged from the system to improve system performance.
B.
Master file update -- Data from the transaction files is used to update account balances in the master files. For example, the data from recording a utilities bill payment would be used to increase the balance of the utilities expense account and decrease the balance of the cash account in the general ledger master file.
1. Master files are used to maintain transaction totals by account:
a.
Master files -- In a computerized environment, they are equivalent to ledgers in a manual environment.
b. The general ledger and the subsidiary ledgers are all examples of master files.
c. Master files are permanent files. The individual account balances change as transactions are processed but the accounts and master files themselves are never deleted.
C.
System output -- The master file account balances are used to produce most reports.
1. The general ledger master file is used to produce the financial statements.

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